China’s exports for the month of March fell by 15% from a year ago (in dollar terms), the General Administration of Customs said today. It was a big surprise to markets and investors, who were expecting a rise of as much as 12%. Imports also dropped, by 12.3%, although that was in line with expectations. As a result China’s trade surplus shrunk for March to just $3.1 billion, compared with expectations of $40 billion or more.
Deciphering what’s behind China’s official economic data is always more of an art than a science, but surprises this big are rare, in part because the data are usually so carefully managed. Here are a few of the most credible theories from economists and analysts:
The strong yuan is curbing foreign demand for Chinese products. China’s exports are being stifled by a yuan that strengthened slightly against the dollar in March, and is up 14% against the euro this year, according to analysts like Nie Wen of Hwabao Trust.
A late Chinese New Year holiday trimmed monthly figures. This year’s holiday, China’s biggest, fell on Feb. 19, versus Jan. 31 last year. Factories can shut down for two full weeks after the holiday, which may have cut into March’s figures. Adjusting for the difference between the two years, this drop would only be 4.8%, China’s customs spokesman Huang Songping told the AFP.
Officials are overcompensating for last month’s huge jump. Exports shot up nearly 50% from a year ago in February, a figure that caught analysts by surprise a month ago. Today’s slump is a “mea culpa” for last month’s figure, Tony Nash, vice president at Delta Economics, told CNBC, implying that the data was being managed down. Last month was “way overshot,” Nash said, and March is “a bit of an under-report.”
The Chinese economy is well and truly slowing. As Quartz and others have warned for many months now, China is on the cusp of a serious, and potentially brutal, slowdown. A sudden drop in exports is just the latest sign of what could be a series of shocks to come from China’s official statisticians. Even Chinese officials have warned in recent weeks that country may not be able to meet its fiscal goals, an unusual admission.
The full reason is for China’s March export surprise may never be clear to investors. But global attention is now focused on the next news to come out of China: first quarter GDP data, which will be released on Wednesday (April 15th). If the country’s export industry did indeed suddenly slow significantly last month, look for China to miss its 7% GDP growth target for the quarter.